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Tuesday, August 30, 2011

Aminor but loud ruckus recently broke out in the local press between my colleagues in the Foundation for Economic Freedom and advocates of so-called renewable energy: that vision of power sources that are both clean and unlimited, somewhat like previous conjurations of cold fusion or, even earlier, perpetual-motion machines.
The criticisms from FEF centered on the schedule of feed-in tariffs recently drafted by Department of Energy officials for public discussion. These “reverse tariffs” will be added to consumers’ power bills to subsidize various renewable energy technologies, until they become cheap enough to compete with carbon-based fossil fuels (oil, coal, natural gas). But why the rush? After all, these new technologies will naturally become cheaper over time, with greater usage and continued technical advances.

This reawakened interest in renewable energy is another throw-off from the Philippines’ extraordinarily high level of concern for its environment. This concern, fed by the indefatigable gadflies of civil society, has already led to economically objectionable government policies like wide-ranging restrictions on mining, logging, and other forms of exploiting nature for human benefit. The Church has generally supported such restrictions, at times veering perilously close to the pagan heresy of deifying Nature at the expense of the creature who was created in God’s image.

On her watch, former President Arroyo famously set aside half a day every week for environmental issues, and committed the country to carbon reduction targets even more aggressive than mandated by global protocols. Since our contribution to the global carbon footprint, however, is in fact disproportionately small for our size and population, critics wondered whether such environmental correctness was worth the price to be paid in potentially slower economic growth.

After all, growth will always demand energy—and the faster that growth, the greater the appetite for energy: to power a country’s factories, keep its cars on the roads, and sustain the amenities of modern life to which modern consumers aspire. Thus, among developing countries--where growth is mandatory if populations are to lift themselves from poverty and stay ahead of their own increasing numbers―there has to date been little sympathy for the angst in the developed world over what is seen there as unacceptable environmental costs of growth.

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One definition of RE talks about the potential sources of energy that are readily found in nature―the sun, the wind, the ocean waves and tides, running water, geothermal reserves―and that are clean and renewable, i.e. either inexhaustible or naturally replenished. This definition generally also includes biomass and biofuel, which unlike the others do add to the carbon footprint, but presumably in amounts that are much less than the burning of fossil fuels.

What about nuclear energy? It’s virtually inexhaustible; it does not add to the carbon footprint; and it supplies enough dependable power to serve as the mainstay of baseload (24 x 7) power generation capacity. In fact, I would stand foursquare behind well-known advocates like former Congressman Mark Cojuangco that nuclear energy, by all the traditional standards, has got to be the crown jewel of renewable energy. And it’s something we can put in place during the term of this President: within five to seven years if we start from scratch, three to five years if we retrofit used plants for sale from Korea, two to three years if we simply fire up the Bataan plant.

Of course, the real problem with nuclear energy is that it suffers from a bad rep, mostly the product of perennial hype rather than proven hypotheses. It also carries its own unique challenges, such as how to dispose of nuclear waste (spent nuclear fuel and cooling water) and the minimal, though still nonzero, risk of catastrophic damage (the partial meltdown of the Fukushima nuclear power plant in Japan after the recent tsunami). None of these challenges are insurmountable, but the bad rep remains smelly enough for nuclear to be excluded from politically correct discussions of renewable energy.

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Regardless of the soundness of the economic and financial thinking behind renewable energy, what’s undeniable is the rosiness of its commercial prospects. Over the last five years, the various RE technologies grew capacity by average annual rates of 15 percent to 50 percent, with wind power adding the most capacity and now present in over 80 countries. Solar photovoltaic capacity was added in over 100 countries last year alone. Globally, over 3.5 million direct jobs have been created in RE, half of them in the biofuels sector.

As a booming new industry, manufacturing leadership in RE is now shifting from Europe to Asia (China, India, South Korea). One UN agency estimates that the Asia-Pacific will need to invest up to $600 Billion until 2050 in order to reduce greenhouse gases in the region to desired levels. China is expected to account for more than half of this new investment, followed by India with 17percent.

Last year, renewable energy investments worldwide reached $211 billion, a third higher than the $160 billion a year before. This excludes some $15 billion in (unreported) investment in solar hot water collectors, plus another $40 billion to $45 billion in large hydropower projects. And for the first time ever, the share of developing countries in RE exceeded that of developed countries in 2010, with China accounting for over a third of total renewable energy investments the second year in a row.

This bright future now being predicted for renewable energy in the region is certainly worth taking a closer look at by businessmen and other interested readers. For more detailed analysis of the global picture, technology background, and Philippine situation of renewable energy, you can subscribe to upcoming issues of The Censei Report, our online weekly digest of news analysis. Just email me at my address below.

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I’ll complete my piece this week by saying goodbye to a grand old lady, my mother-in-law, Penafiel Sualog Salmingo, who passed away last Sunday, two weeks after her ninety-first birthday.

Lola Pena lived long enough to see her great-great-grandchildren--a rare privilege―but also kept her wits about her until the end―another rare blessing. Her biggest gift to me was my wife, of course, and I’m glad I was able to return the favor by being at her bedside during her very last moments on earth, standing in for her large and far-flung brood, my in-laws.

It wasn’t something I’d been able to do with my own parents when they passed away years ago, and I’d like to think that right now, they’re thanking her too for having stood in for them with me so I could say my farewells properly. God be praised.

Monday, August 29, 2011

BusinessWorld Online

Opinion

Introspective -- Calixto V. Chikiamco

Posted on August 28, 2011 08:41:12 PM

Can political reform be divorced from economic reform? Is the Pope Jewish? There’s this fashionable idea that what the country needs to achieve a sustainable, high-growth path is to focus solely on economic reforms. Discussions about a Philippine development agenda revolve almost entirely on economic policies -- raising the tax effort, hastening Public-Private Partnership implementation, liberalizing foreign ownership limits, etc.

There’s indeed some talk about political reform in the context of good governance, primarily centered around reducing corruption. But how policies to improve good governance and reduce corruption relate to sustainable economic growth is not entirely clear. While there might indeed be some moral imperatives to follow the "matuwid na daan," the strategic underpinnings of how an anti-corruption crusade can lead to sustainable development aren’t understood. Absent are analyses and discussions of political reform and how they relate to the development agenda.

Take, for example, the problem of low investment spending. Investors, both foreign and domestic, aren’t spending. This is why the system is awash with liquidity. However, investment spending must rise if the country is to go from a consumption-driven growth to an investment-driven growth. Only an investment-driven growth will increase the country’s productive capacity, make a real dent on the unemployment problem, and sustain high levels of GDP growth.

The problem is not simply one of corruption. Corruption is prevalent in many of our Asian neighbors as well but that has not deterred investors in those countries from spending. Corruption may well be efficient, as some observers say, because it facilitates transactions and enables investments that would not otherwise have been done. However, in the Philippines, corruption is dysfunctional, because outcomes are not assured. Contracts may well be overturned by successors or sabotaged by either the courts or some other parts of the bureaucracy.

Overall, what investors complain about is inconsistency of policies and weak enforcement of property rights. These point to an institutional problem, and institutional problems can’t be fixed with economic reforms alone.

These institutional weaknesses show up in many ways and give investors pause. For example, it’s widely perceived that President PNoy relies on "kaklase, kabarkada, andkabarilan" and not really on his own political party. True or not, investors will wonder whether a system that’s dependent on personal and kin-based relationships can guarantee stability and consistency of policies over time. If a kaklase falls out of favor, will a kabarkada successor continue the former’s policies? What does a kabarilan really stand for? Given also our weak bureaucracy, there’s no assurance that the policies of President Aquino or his appointees will be institutionalized and carried over to the next administration.

More than eliminating corruption, investors want policy stability and security of property rights. That can’t happen if there are no genuine political parties and if the bureaucracy remains weak and politicized. Economists talk about investors needing "credible commitments" from the state, but can a state that’s influenced by kaklase, kabarkada,and kabarilan deliver those "credible commitments?"

The weak bureaucracy and lack of modern, programmatic parties therefore are "binding constraints" as much as monopolies and labor rigidities are.

It’s not only an effective bureaucracy and a genuine political party system that are needed to improve the climate for investments. Electoral reforms are, too. In a previous column, I said that electoral reforms are the "mother of all reforms." It’s not hard to see why. All the evils that spawned from the Macapagal-Arroyo presidency, from the abuses by the Ampatuans to the fraudulent sale of pre-owned helicopters to the PNP, stemmed from an electoral system that’s easily manipulated and rigged.

Development is not simply a matter of "getting prices right." Growth doesn’t simply happen. Both institutions and economic policies must interact to create an environment conducive to growth and investment.

What’s troubling is that the Aquino administration seems clueless about any kind of reform, economic or political, other than pursuing malfeasance in the previous administration. It’s bad enough that both the State of the Nation Address (SONA) and the Legislative Agenda do not contain any strategic economic reform agenda, whether it be liberalizing foreign ownership limits or reforming the National Food Authority; the absence of any political reform agenda, to strike at the roots of our graft-ridden system, is severely disappointing.

Besides, the anti-corruption crusade, the sole program of President Aquino, must prove to be balanced and symmetrical, i.e., applicable not only to former President Gloria Macapagal-Arroyo and her cohorts but also to President Aquino’s own erring subordinates, before it can be declared a success.

To achieve development, we need to modernize our political institutions as much as our economy. Our weak, inefficient, and politicized bureaucracy, our flawed and money-driven electoral process, our lack of ideological parties, our unmeritocratic practice of appointing public officials -- these are also binding constraints to development. Political reform as much as economic reform must be on the nation’s agenda.

Calixto V. Chikiamco is a board member of the Institute for Development and Econometric Analysis.

Wednesday, August 24, 2011

Mayor Adelino Sitoy of the municipality of Cordova, Cebu recently declared the titling of properties a priority for his administration.

Issued on July 14, 2011, Executive Order No. 17, s. 2011 created a Land Management Council Council (LMC) and a Land Management Office (LMO) in Cordova, a third-class municipality in the 6th district of Cebu Province.

The EO is in consonance with DENR Administrative Order 2010-06 which provides guidelines on DENR-LGU partnership in titling and programs and encourages the creation of LGU land information office and cadastral council to facilitate titling.

The LMC is composed of the Municipal Assessor, Treasurer, Planning and Development Coordinator, Environmental and Natural Resources Officer and Community Environment and Natural Resources Officer (DENR) and headed by the Mayor.

It shall gather, maintain and update information about land policies, issues, challenges and opportunities; analyze such information to recommend appropriate policies and management intervention to the Mayor and Sangguniang Bayan; and supervise the activities of the LMO.

Supervised by the Municipal Assessor, a Land Management Office was created to carry out the policy direction set by the LMC. Coordination with other agencies such as the DENR and Register of Deeds shall be undertaken to obtain information, technical assistance, training and specific technical services.

The first LMC meeting was held on 3 August 2011 chaired by Mayor Sitoy and attended by representatives of DENR Regional Office (Region 7), DENR-CENRO Cebu City and Cebu City LMO, Cordova municipal officers with Vice-Mayor Rodrigo Jumao-as, and the Foundation for Economic Freedom (FEF), a public advocacy organization implementing the Property Rights for Economic Progress program with the support of the United States Agency for International Development (USAID) and The Asia Foundation.

DENR Regional Technical Director for Lands said that the first step to be undertaken for the DENR-LGU partnership on public land titling is the signing of a Memorandum of Partnership Agreement between the DENR Regional Executive Director of Region 7 and Mayor Sitoy. Ms. Liezl Gonzaga of the Cebu City LMO shared their experience on their start-up activities prior to titling. Cebu City LMO was established on January 14, 2011.

The next step identified is training the members of LMC and LMO on public land titling and systematic adjudication. The LMC meeting shall meet monthly or as often as necessary.

FEF is a public advocacy organization dedicated to advancing the cause of economic and political liberty, good governance, secure and well-defined property rights, and markets-oriented reforms. FEF believes that ensuring a secure property rights regime will result in a stable and fertile environment ripe for economic progress.

It counts among its members former and present Cabinet secretaries and undersecretaries, leading figures in the academe, respected media personalities and opinion makers, and prominent members in the business and finance community.

Tuesday, August 23, 2011

MANILA, Philippines — Prospective solar developers are in for a deeper dilemma with the proposal of Joint Congressional Power Commission co-chairman and Senator Sergio Osmeña III to further trim down the grid-integrated solar installations to 20 megawatts from the 50MW already endorsed by the Department of Energy.

But the lawmaker has a counter-proposal. He recommended that the solar developers must shift their attention to off-grid areas, where up to 100 megawatts of installations can be easily earmarked for them.

“The avoided cost in off-grid areas is P12 per kWh for diesel facilities, so it will be more feasible to re-channel your investments there,” he stressed.

Even at 50MW, the lawmaker indicated that the cost impact would still be “considerable” given that all consumers will have to bear the brunt of the P17.95 per kilowatt hour (kWh) feed-in-tariff (FIT) set for the technology.

The position of most of the JCPC lawmakers will be to wait for the time when the cost of solar will go down dramatically so the consumers will not be unduly burdened with exorbitant FIT which would be locked up for 20 years.

It came directly from the words of affiliated companies of the Philippine Solar Power Alliance (PSPA) that with China and Japan “sucking up the solar market,” the cost for the technology may decline drastically in the next few years.

Project developers are proposing to solve the teetering supply crisis in Mindanao with solar-based generation, but lawmaker and other players in the industry view this as an expensive proposition.

The solar project proponents, however, are trying to soften the cost impact by presenting the “blended rate” that would eventually be passed on to consumers – meaning, the high FIT rate for solar may be alleviated once integrated with the lower costs of hydro and other technology options. The overall FIT to be passed on in the bills then would be lower.

Project developments in off-grid areas are also subsidized through a universal charge for missionary electrification, but recovery for such costs have been incurring considerable lag times. Therefore, it may not entirely be an attractive proposition for developers.

In contrast, the collection for FIT rates may turn out more straightforward and it is seen getting administered more efficiently. As a result, settlements with project sponsors may be done in a more expeditious manner.

The suggested solar capacity may reach as high as 400 megawatts. Of the prospect, 150MW have already been formally applied for in Mindanao by 6 to 7 developers.

Based on the record of the energy department, however, the 11 proposed solar projects for the grid may only yield a total capacity of 96 megawatts.

Wednesday, August 17, 2011

The folks with commercial interests selling imported solar and wind hardware thought getting their subsidy would be like stealing candy from a child after they hoodwinked our clueless legislators into quickly passing a Renewable Energy Law. But people are belatedly asking a lot of good questions.

These vendors are now getting a little nervous in their attempt to fast track the imposition of a subsidy for them to be paid for by the over burdened Filipino power consumers. They are even attacking Energy Secretary Rene Almendras because they see him as being too cautious in embracing their subsidy called Feed-in Tariff or FIT.

They have launched a full blast propaganda blitz. Reporters have been taken to junkets here and abroad to hear the gospel of renewable energy and be convinced. They have hired more than one PR agency to do battle. One of them sent a letter to my editor contesting my assertion in my column last Monday about the imposition of FIT.

They asserted in the letter that the FIT is not burdensome on the consumer… not as bad anyway, as the planned imposition of universal charges (Napocor stranded costs) on power rates by the Power Sector Assets and Liabilities Management Corp. (PSALM). Here are portions of that letter:

“PSALM wants to charge consumers 39 centavos/kwh to pay for its stranded debts incurred during the past administrations. On a mere 100kwh/month consumption by the poorest household in Tondo, that’s an monthly increase of P39 on his electricity bill.

“The feed-in tariff (FIT) rates will help develop renewable energy (RE) technologies which will replace expensive bunker oil power generation. The installation of a 100 MW solar plant does not need fuel and will impact on the consumer an increase of only 2.37 centavos/kwh. If the homeowner’s average consumption is 100 kwh per month, his electricity bill will only increase by P2.37 a month due to the installation of the 100 MW Solar Plant.”

The letter inadvertently proves the point that the FIT is untimely. Our electricity bill is about to balloon as PSALM starts collecting substantial and unavoidable universal charges and Meralco can pretty much charge what they want under the current so called Performance Based Rate scheme (the metrics on efficiency and frequency of dropped service are all under Meralco’s control). Putting another imposition called the FIT on top of all those on the back of consumers doesn’t look good.

The letter also made spurious claims, first about how RE or renewable energy technologies “will remove the burden of high electricity costs off consumers when small businesses and individual households are allowed to produce their own electricity.” The second is about how FIT “will provide an investment that goes towards achieving energy security and economic growth.”
Those two claims are simply over promising benefits RE technologies other than run of river hydro and biomass can deliver any time soon that can be considered significant. As for the numbers cited, respected economist Philip Medalla, the Chair of the Foundation for Economic Freedom (FEF) and recent appointee to the Monetary Board had debunked that line of argument a long time ago.

Here is what Dr. Medalla said about FIT, which really is more of a tax: “These people try to make the taxes look small by diving it into 65B kilowatts. And everything looks small when divided by 65 billion. Do not look at it on a 10kw/hour basis. Look at it in terms of absolute pesos. And let me tell you what you can do with P8 billion... You could subsidize two more LRT lines. This will reduce traffic and the impact on carbon emissions will be greater and the impact on the people will be better. So what I’m saying is be careful when you ‘waste’ P8 billion.

“Solar and wind are expensive. With that being the case, I would rather have biomass because solar and wind will be largely imported. With all other things equal, I would just want to get the source that’s cheapest and buy nothing that costs twice as much as conventional power. You have to listen to the arguments. Why is something expensive preferred? If the argument is employment, solar and wind loses. They employ the least.”

It isn’t just me or my friends at the FEF. Sen. Sergio Osmeña III also believes it is not the right time to develop the use of on-grid solar energy in the country as proposed by the National Renewable Energy Board (NREB) because of the high cost that would be passed on to the consumers. Serge is one senator who diligently studies issues and crunches numbers himself.

As chairman of the Senate committee on energy and co-chair of the Joint Congressional Power Commission (JCPC), Osmeña said that the feed-in-tariff (FIT) system to promote renewable energy should be implemented with caution, especially for solar energy.

“The DOE should exercise extreme caution in the implementation of the FIT system considering that it imposes additional costs on the consumers particularly in the early years. Solar energy, if introduced in haste, will be an unnecessary burden on the consumerover a period of 20 years,” Osmeña warned.

Osmeña said the board’s proposal to allocate 100 megawatts (MW) to solar energy at P17.95 per kilowatt-hour (kwh) under the FIT would not be viable at this time when costs of solar panels are still too high. He noted that the FIT for other renewable energy sourceswill be lower at P6.15/kwh for mini-hydro, P7/kwh for biomass energy, and P10.37/kwh for wind power. Ocean energy will have a tariff of P17.95/kwh just like solar but only 10 MW is allocated for it because it is an experimental technology.

While the solar advocates are fighting for their commercial interests, the FEF is a loose grouping of economists and wanna-be economists like myself who are spending personal time and resources to wake up the public and our officials on the implications of this seemingly earth-friendly imposition. And when I asked them why they are bothering to do this, I was told that they believe economists also have their version of the Hippocratic Oath: Do no harm. Romy Bernardo, who used to be a Finance usec under FVR explains that “harnessing the collective sharp minds of FEF and its credibility, we can actually try to stop this one and make a difference – possibly save as much as P8 billion every year for 20 years.”

Bernardo pointed out that “economics is about the allocation of limited resources, in this case, the CONSUMERS’ MONEY, over competing needs and wants. The benefits from achieving those objectives must be weighted against other competing uses for those funds. In the JCPC hearing, our colleagues mentioned many programs which have potentially better value for our consumers at lower cost.”

Citing the case of solar, Bernardo bewailed what he calls often misleading representations to the public. “They have to understand that a solar plant built now will get 17.95/kWh plus forex and cpi adjustments for the next 20 years, the degression does not apply to them, only to plants built later. Some people might get the mistaken notion that these contracts have a declining rate, not true.”

It is noteworthy that China, the largest producer of solar panels today, does not have a FIT scheme for solar. Dr. Medalla also observed that if we must burden our consumers and industry with a FIT tax, it should be used to help the more efficient RE technologies – run of river hydro and biomass, which is not only cheaper (on a per kWh, half the cost of solar, one third required subsidy), but also creates employment and provides incomes for our rural poor communities, instead of foreign solar and wind hardware manufacturers.

As for our obligations to Mother Earth, it should be emphasized that because our country’s contribution to carbon emissions is only less than one percent, unlike the rich, developed countries, we have no moral or legal obligation to slow downglobal warming. Furthermore, the share of renewables in our energy mix is already 32 percent, much more than the 10 percent in the US and other countries.

Anything else you hear on this RE debate that requires us to pull out our wallets and buy something from mostly foreign companies selling solar or wind technologies are sheer propaganda. Their emotional pitch about saving the earth should be tempered by sheer economic facts and numbers specially for a poor country such as ours.

Matter of size

This was sent by Jose Villaescusa.

Chinese: Sir, we got huge order from USA for 12-inch condoms. I think it is meant to embarrass us!

Chinese Boss: No problem...just complete the order and mark them size “SMALL”!

Sunday, August 14, 2011

MANILA, Philippines — Department of Energy (DoE) Secretary Rene D. Almendras has announced they are going to bid out the 760 megawatt initial renewable energy (RE) installation targets, foiling assumptions by developers that they have been accommodated.

The policy was clearly laid down by Almendras when he said that no one was “in” yet and that the process of project selection shall be done through a bidding.

Industry talks circulated that the RE developers have been allowed to allocate among themselves which of their proposed capacities should be in the installation targets across technologies, but Almendras qualified that “there is no agreement of such and we are not involved in any agreement with developers.”

The energy chief set on record that that Joint Congressional Power Commission (JCPC) “insists that a bidding process be done. We will wait for their directions.”

If a “no bidding policy” will be established as a system in the allocation of the RE installations, the DoE and the energy secretary have been cautioned that they could be held legally liable for that, because primarily, the government would not be able to get the best deals or it may end up with carpetbagging project developers with no track records in power project developments – and that would be to the disadvantage of the Filipino consumers.

Additionally, the feed-in-tariff (FIT) charges to be passed on in the electric bills take the form of “guarantee” for the RE projects, hence, the award of the installations must go through “biddings” as is the usual course for government-led investment undertakings.

The auction process could also be a perfect venue for DoE to re-evaluate prospects on how RE costs would eventually go down. When a system is established, the FITs can just be held as a ceiling for the pass-on subsidies as some developers may come up with proposals having lower costs.

In the meantime, the energy department disclosed that “internal meetings” will be held so they can start “laying out the eligibility criteria and then agree on a process for the bidding.”

Almendras similarly pointed out that the RE developers cannot avail of FITs across various technologies. For instance, if one project developer would want to pursue projects in wind, solar, hydro and biomass, it would just have to choose in which technology it would want to avail of the FIT.

“It cannot be allowed that there would be one group benefitting from FIT for all technologies. So if (a developer) wants to get FIT for wind, it would just be for wind. It would no longer be eligible for FIT in the other technology installations,” the energy chief explained.

The very intense lobby of the RE developers became even more evident the past weeks, with some groups counting themselves in the installations already going all-out with their press releases and full-page advertisements to add pressure to the immediate approval of the FIT charges.

Almendras reiterated that he will push for RE developments and their integration into the country’s energy mix, yet he qualified that this must be paced prudently because of cost implications of some technologies and also on their impact in the country’s power system.

LOCAL government units (LGUs) and the Association of Geothermal Energy Producing LGUs (AGEPL) are pushing for the suspension of the implementation of Republic Act 9513 or the Renewable Energy Act of 2008.

Ormoc City Mayor Eric Codilla, president of AGEPL, said Section 15c of the law, which provides that power generator or developer using renewable energy should only be subjected to a maximum realty tax rate of 1.5 percent, would greatly affect the operation of the geothermal-host LGU, especially on their Special Education Fund (SEF).

The SEF gets 40 percent of the Real Property Tax (RPT) while the rest is divided between the LGU (70 percent) and barangays (30 percent).

Among the barangays, the host community gets the lion's share of 50 percent while the other half is divided by the rest of the villages."The slashing of one percent of the existing 2.5 percent realty tax from the developers would mean a reduction of our SEF that takes 40 percent of the city's real property taxes," Codilla said.

Ormoc City is host to Energy Development Corp. (ECDC), the city's highest real property taxpayer.

EDC's RPT is expected to drop to P60 million if the law is implemented which will impact on the SEF. Expected to be hit first are the teachers' allowances, hiring of city-paid job order teachers, and participation to provincial, regional and national sports events.

Codilla said AGEPL has already submitted open letters to President Benigno Aquino III asking for the deferment of the implementation of the law. Similar letters were also sent to the Department of Education and Department of Energy for their support.

Codilla said the alliance composed of the cities of Ormoc, Kidapawan (North Cotabato), Sorsogon (Sorsogon), and the towns of Kananga (Leyte), Valencia (Negros Oriental), Sto. Tomas (Batangas), Manito and Tiwi (Albay) have joined the call and would submit a manifesto to the Senate asking to exempt the existing developers from being covered by RA 9513.

"Since RA 9513 is already enacted, the best thing they can do is to weak the law's applicability so that the RPT reduction will be applied to host communities of newly developed renewable energy sources. Applying the law on existing resources is unfair considering the RPT is already part of the developers' production cost," Codilla said.

According to him, power rates of existing plants are based on present tariffs but reducing the RPT will not necessarily redound to lower power rates because RA 9513 does not compel power plant owners to do so and that makes the law advantageous only to investors, and not the government and consumers.

"In the case of Ormoc City, since EDC already existed before the enactment of the law, it should be exempted from this special realty tax rate provided in RA 9513," Codilla said.

Ormoc City currently collects P100 million real property tax from EDC. As of May this year, the city has been utilizing EDC's 1 percent SEF amounting to P40 million to build 186 classrooms and school perimeter fences, to distribute school supplies, to open new high schools and to cover the salaries of 52 job order teachers.

Codilla said that in 2004, the city has collected only P20 million and insisted for the provision in the Local Government Code to collect the actual taxes due for the city.

Since 2006 when Ormoc began collecting RPT from EDC, it has spent more than P237 million to build 183 classrooms, 32 two-unit comfort rooms, 66 perimeter fences, four covered courts, three stages, etc. in different schools. When before, Ormoc classrooms accommodated 85-115 students each, the ratio has gone down to 1:60.

The city has also established the country's first e-learning center and plans to build 10 more similar facilities this year. It allotted P1 million in 2010 to finance 44 scholars and P1.2 million in 2011 for 37 scholars. It also provides school supplies to all elementary pupils in public schools every school year consisting of four notebooks, two pad papers and two pencils.

Meanwhile, the mayor admitted the move against RA 9513 implementation is expected to be difficult but he said he is hopeful of this to succeed to protect the future of education in his city and the rest of the geothermal-host LGUs in the country.

Ormoc is still reeling from the P40 million reduction of its Internal Revenue Allotment after the Supreme Court upheld the conversion of eight new cities.

Scheme seen to ensure lowest possible power rates

A group of economists has urged the government to auction to investors the limited installation allotments of 760 megawatts for renewable energy sources to derive the lowest possible rates for each resource.

According to the Foundation for Economic Freedom (FEF), this could be an alternative to the imposition of feed-in-tariff rates, which, once implemented, would further burden all electricity consumers through a universal levy called FIT-Allowance.

The FEF made the suggestion to the Energy Regulatory Commission (ERC) as it expressed concern over the “expected increase in electricity prices that will be borne by consumers inequitably and that which can erode local industry competitiveness.”

The proposed FIT rates, FEF added, should likewise be treated as price ceilings—if proponents are willing to supply at a lower price, lower tariffs should be awarded.

Based on the application filed by the National Renewable Energy Board last May, solar developers and oceanenergy project proponents will enjoy the highest feed-in-tariff rates of P17.95 a kilowatt-hour and P17.65 a kWh, respectively. Investors in wind development will be given a FIT rate of P10.37 a kWh; for biomass, P7 a kWh; and for hydro, P6.15 a kWh.

The government, however, has yet to officially decide on how it plans to allocate the installation target of 760 MW over the next three years.

Of the 760-MW installation target, as submitted by the Department of Energy (DoE) to the ERC, only 50 MW in new installations would be allowed for solar facilities; 200 MW for wind; 10 MW for ocean; 250 MW for hydro; and 250 MW for biomass.

The division may prove to be difficult as the approved renewable energy service contracts as of June 7 showed that potential projects could generate an estimated 2,823 MW—not to mention that there were close to 400 service contract applications whose approval remained pending to date.

Some developers earlier criticized the DoE for floating the idea of companies deciding among themselves as to whose project would be included in the allocated capacity.

But Energy Secretary Jose Rene D. Almendras said in an interview that he never made announcements that insinuated such an idea.

“I never said they should talk among themselves to decide. Senators are also suggesting [the installation target] should be bid out. We will wait for the ERC decision and consult with legislative branch,” Almendras told the Inquirer.

About Me

FEF is a public advocacy organization dedicated to advancing the cause of economic and political liberty, good governance, secure and well-defined property rights, and market oriented reforms. It counts among its members former and present Cabinet secretaries and undersecretaries, leading figures in the academe, respected media personalities and opinion makers, and prominent members in the business and finance community.